Chapter 13 bankruptcy laws
Chapter 13 bankruptcy laws is that part of the US bankruptcy code which allows an individual to make debt repayments in full or in part, over a period of 3 to 5 years, without being compelled by the court of law to forfeit property. Alternatively known as reorganization bankruptcy, chapter 13 bankruptcies are most suited to persons with predictable incomes where an expected surplus of earnings can be diverted to repay debts after the regular living expenses of the debtor is met.
ELIGIBILITY CRITERION FOR CHAPTER 13 BANKRUPTCY
is allowable when the petitioner with a regular income has less than $307,675 in uUnder the precincts of the federal law, bankruptcy filing under Chapter 13nsecured debts (such as credit cards) and less than $922,975 in secured debts (such as mortgages and car loans). In a joint Chapter 13 case those limits are not doubled, instead they are applied to the total amount owed by the debtors.
Chapter 13 bankruptcy lawsis refused in the event the debtor received a discharge in Chapter 7, 11, or 12 within the last 4 years, or a discharge under Chapter 13 within the last 2 years.
The 2005 amendment to the bankruptcy law makes mandatory a state approved course in credit counseling from a government recognized agency which should give a certificate of proof of completion at the end of the session.
Look for certified credit counseling agencies in your locality for further information in this aspect.
THE CHAPTER 13 PROCESS
Documentation is the most important segment in any legal procedure. For filing any kind of bankruptcy a petitioner must initiate the process of procuring relevant documents way in advance of filing. In Chapter 13 bankruptcies, one is expected to have ready the bankruptcy petition or the legal forms duly filled out, a listing of what one owns, earns, owes and spends, credit counseling certificate, federal tax return for the previous year and proof of filing federal and state tax returns for the last four years. In addition, the debtor must also file a Chapter 13 bankruptcy laws repayment plan which must outline a schedule for disbursing debts. A filing fee also needs to be tucked in with the aforementioned documentation.
In order to complete the forms that make up the petition and schedules of income, debts and assets, etc., the debtor must compile the following information:
1. A list of all creditors and the amounts and nature (secured or unsecured) of their claims;
2. The source, amount, and frequency of the debtor's income;
3. A list of all of the debtor's property; and
4. A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.
If you are married you must gather this information for your spouse regardless of whether they are filing a joint petition with you, a separate individual petition, or even if they are not filing.
BANKRUPTCY AUTOMATIC STAY
Once you have filed a Chapter 13 bankruptcy laws an automatic stay against all collection efforts takes effect. The ostentatious purpose of it is to protect the petitioner from being harassed by phone calls, letters or even lawsuits from creditors and collection agencies.
The automatic stay also serves to prevent foreclosures, repossessions or sales of property. However the ban can be lifted upon persuasion from creditors to the bankruptcy courts if the debtor is still found delinquent in making his past-due payments over a reasonable period of time.
Under Chapter 13 bankruptcy there is a special stay provision to protect co-debtors as well. In this a creditor or loan collector is prevented from coercing debt collection from the co-debtor in a post bankruptcy filing environment.
THE CHAPTER 13 REPAYMENT PLAN
The Chapter 13 bankruptcy laws plan describes in detail the manner and the amount to be used up in repaying each of your debts. Priority debts must be repaid in full. Here is a list of priority debts which cannot be pardoned in spite of bankruptcy.
Child support and alimony
Student loans from government, non-government and profit making organizations declared non-exemptible under the new bankruptcy law in October 2005.
Recent income tax debts and all other tax dues.
As for secured debts like mortgages and car loans, the debtor
is expected to pay the value of the collateral against which a loan had been secured or else, he has to forfeit ownership.
It is not mandatory to pay the unsecured debts in full so long as the court is satisfied that all of your disposable income is being used to pay off debts.
ROLE OF A TRUSTEE
A Chapter 13 trustee is appointed by the United States Trustee board. His role is to verify the accuracy and reasonableness of a proposed payment plan, submitted by the debtor. The trustee reviews if the suggested plan besides taking care of debt payments reasonably accommodates the debtors living expenses. Since the trustees recommendation carries substantial weight in the court proceedings it is recommended to be honest and open about your financial nitty-gritty with him.
MAKING PAYMENTS
One must initiate making payments under the Chapter 13 plan within 30 days after filing. Usually payments are made directly to the bankruptcy trustee or through payroll deduction. Once the repayment plan is confirmed the trustee distributes the money among creditors.
In case a person defaults Chapter 13 repayment plan the bankruptcy trustee may modify the plan. The trustee may under the circumstances
Agree on a grace period
Reduce total monthly payments
Extend the repayment period.
If he still is unable to keep with the payment schedule, the trustee can dismiss the bankruptcy case, or convert it to a Chapter 7 bankruptcy.
CHAPTER 13 DISCHARGE
You are entitled to a Chapter 13 discharge upon completion of all payments under the Chapter 13 plan so long as you:
1. Certify (if applicable) that all domestic support obligations that were due prior to making such certification have been fulfilled;
2.Have not received a discharge in a prior case filed within a certain time frame (two years for prior chapter 13 cases and four years for prior chapter 7, 11 and 12 cases) and
3. Have completed an approved course in financial management (if such courses are available in your district).
Once you have received your discharge, you are released from further liability on all debts included in the bankruptcy, with the exception of certain long term obligations, such as mortgages, support obligations, taxes, and student loans, as well as certain civil and criminal fines.
Many find it hard to decide between the appropriateness of a Chapter 7 filing or a Chapter 13 bankruptcy filing. Chapter 7 has been the most sought after escape route for desperate debtors trying to flee all responsibility of debts. But the qualifying criterion for Chapter 7 filings have been made stringent under the aegis of the new law passed in 2005. Chapter 7 bankruptcy essentially involves complete liquidation of a debtor's property to pay creditors and wipes out all of the remaining debts, giving the debtor what's known as a "fresh start". However, the debtor can retain property that is specifically "exempt" but can loose out on any non-exemptible asset. If you are someone with precious non-exemptible assets from which you would not choose to part, Chapter 13 is the right course to take. In this you can keep your valued property in exchange for a consignment to a debt payment strategy. Again, if you are seriously intent upon paying debts and have a sustained income to support you through filing under Chapter 13 is ideal. Besides, a record of chapter 13 bankruptcy is likely to fall off your credit report in 7 years while a Chapter 7 bankruptcy can haunt your credit standing for 10 years. Seek counsel, or hire a paralegal to obtain valuable guidelines in this regard before taking the quantum leap into bankruptcy. It can save you, your finances and your family.
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